It was a long, long time coming, but yesterday Nomura finally bit the bullet and restructured its unwieldy equities execution business – and it bit down hard.

The Japanese investment bank, which is looking to strip out some $1bn from its cost-base, has said it will transform Instinet – its wholly-owned agency brokerage subsidiary and long-time pioneer of electronic trading – into its fully-fledged, agency execution arm.

In May, Financial News reported that Instinet was likely to become the electronic trading arm of Nomura, but yesterday's announcement went much further than expected. Nomura will transport all its execution functions – including cash trading, program trading, and electronic execution – into Instinet, in a bold but sensible move.

Nomura bought Instinet in 2006 from US private equity firm Silver Lake at a time when the Japanese bank did not have a large European equities business. Its subsequent takeover of the European and Asia-Pacific parts of Lehman Brothers transformed it into a major equities player, but it also left the bank operating two competing businesses in a market which, unbeknown to the management at the time, was heading for a slump.

The bank has been wrestling with this conflict for nearly two years. It could have taken the more conservative and politically palatable approach expected by onlookers, and push just its electronic execution function into Instinet. But that would not have solved the fundamental problem. The businesses would still have competed with one another and Nomura would not have been able to make the cuts – both in terms of technology infrastructure and headcount – necessary. Now, it can retire elements of the legacy Lehman infrastructure and, although it will not comment on job cuts, take out some pricey headcount too.

The restructure also underlines the ongoing, critical importance of research to the equities execution business. In the absence of a research platform, it has become increasingly harder for agency-only brokerages like Instinet to capture a share of the ever-dwindling commission pool, since many asset managers still like to pay for their content with their execution commissions. By allowing asset managers to pay for their Nomura research by trading with Instinet, the brokerage will have access to a larger chunk of the fee pool.

It will be interesting to see how the transition works in practice and how Instinet's institutional clients will feel about sharing the floor with the HFT clients for which Nomura is known in the industry. But in many respects, Nomura is now in a stronger position than the other bulge brackets trying to work out how they can shrink their unprofitable equities execution franchises and still operate a credible equity capital markets business.

So why did it take so long? The answer, of course, is internal politics. Insiders describe a protracted three-way tug of war between the Instinet camp, the Nomura-ites responsible for the acquisition of Instinet in 2006, and those who oversaw the acquisition of the Lehman Brothers equities franchise three years later. Amid this internecine struggle, confusion reigned, according to one insider.

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But events took their course. Yesterday's restructure was accelerated following senior management changes in recent weeks; Nomura's chief executive Kenichi Watanabe and his deputy Takumi Shibata stepped down in July after an insider trading scandal. Once these architects of the Lehman acquisition were out of the way, combined with the May removal of Anthony Abenante, the former co-chief executive of Instinet who was wedded to maintaining the company's independence, "the emotion was taken out of it", said the source.

For Instinet, yesterday's announcement marks another chapter in a colourful 45-year history that has seen the company embody several forms – a start-up, a Reuters-owned alternative trading platform, a private equity asset. It is a testament to the brokerage's long-lived brand - and the degree of misty-eyed sentimentalism that it continues to evoke in the industry – that Instinet was ultimately able to win out against the ex-Lehmanites.

Yesterday's announcement will have no doubt raised a cheer among the extensive diaspora of Instinet alumni, who wear their Instinet credentials as a badge of honour. They can continue to do so, at least for the time being.